Banxico Identifies Adjustments in Public Works Construction and Decline in Oil Mining as Negative Factors
The southern region of Mexico has once again become the only part of the country to report a contraction in its economic activity during the second quarter of 2025, with an interannual decline of 3.2%, continuing four consecutive quarters of decrease, according to information from the Bank of Mexico (Banxico).
Economic Sector Declines in the South
In the region comprising Campeche, Chiapas, Guerrero, Oaxaca, Quintana Roo, Tabasco, Veracruz, and Yucatán, the drops were seen in construction (51.5%), mining (10.0%), and tourism (4.8%) compared to the second quarter of 2024, as per Banxico’s Report on Regional Economies (April-June 2025).
The southern mining activity significantly contributed to the national decline of 8.2% in the quarter, followed by tourism which fell 3.4%, agriculture which decreased by 2.1%; construction remained stagnant, while manufacturing and commerce grew by 1.1% and 1.7%, respectively.
Regional Performance Comparison
By the second quarter of the year, the northern region grew 0.9%, driven by the manufacturing and construction sectors. The center-north advanced 1.1%, with strength in manufacturing and commerce.
The center region demonstrated the best performance with a growth of 2.0%, led by agriculture (18.7% higher) and commerce. Nationally, the economic activity grew 1.2% interannually.
Petroleum Factor
The Indicador Trimestral de la Actividad Económica Regional (ITAER), which aims to estimate the evolution of each region’s Gross Domestic Product (GDP), reveals that excluding petroleum activities from the southern region’s economic performance lessens the severity of the decline.
The southern region contributed 16.9% to the nation’s GDP in 2023, with petroleum-related activities accounting for 2.8% of the total contribution. The oil mining, predominantly concentrated in this area, was limited by “the natural decline of the Maloob and Zaap offshore fields, as well as the Quesqui and Tupilco Profundo landfields.”
Business leaders informed Banxico of reduced Petróleos Mexicanos (Pemex) drilling activity compared to the previous quarter, which resulted in decreased operations for drilling rigs and consequently affected activities like pipeline installation and related services.
The reduction in Pemex investment is reflected in high unemployment rates in the Carmen and Villahermosa areas, decreased availability of supplies and services for the para-state, as well as reduced operations or closures in various sector companies due to unpaid suppliers.
Construction Sector
In the second quarter of 2025, the southern region experienced a 51.5% interannual decline following its atypical growth due to projects like the Mayan Train or Dos Bocas Refinery; nonetheless, public construction value remains higher than the rest of the country’s regions.
Private sector executives reported cautious investor attitudes in housing and office-destined buildings due to “national and international uncertainty, as well as the weakness of domestic economic activity.” In contrast, Veracruz highlighted the arrival of industrial projects that “stimulated land acquisition and the development of new industrial facilities and storage centers.”
Public construction continued to show signs of decline after the completion of major infrastructure projects; however, complementary works on the Campeche Light Rail, Nichupté Bridge in Quintana Roo, and Tren Maya adjacent projects (road segments between Salina Cruz and Zihuatanejo, Palenque and Ocosing), as well as Salina Cruz port expansions and associated auxiliary works related to the Interoceanic Corridor, persist.
Key Questions and Answers
- What is the main issue affecting the southern region’s economy? The significant decline in oil mining activities and adjustments in public works construction have negatively impacted the southern region’s economy.
- Which sectors experienced a decline in the southern region? The construction, mining, and tourism sectors all experienced declines in the southern region.
- How did other regions perform compared to the south? The northern and center-north regions showed growth, with the center region performing best nationally at 2.0%.
- What factors contributed to the decline in petroleum activities? Factors included natural declines in offshore and land fields, reduced Pemex drilling activity, and subsequent effects on related services and supplies.
- What is the current state of the construction sector in the south? Despite an atypical growth phase driven by major projects, the construction sector in the south has shown a 51.5% interannual decline due to investor caution and ongoing complementary works.
